Americans have a high degree of uncertainty about crypto. Only 20 percent have ever owned it, according to a nationally representative survey of 3,208 adults conducted by Consumer Reports from June to July 2022. At least 1 in 5 say they don’t know whether their friends or family own crypto, whether they’d use crypto in different ways, or how crypto firms should be regulated. And there’s substantial public support for crypto regulations. Sixty-two percent of Americans who have heard of crypto say crypto businesses should be regulated the same as other financial businesses, according to CR’s survey.
However, despite the public’s seeming desire for more clarity, financial regulators are still figuring things out about cryptocurrencies. Are they securities like stocks and bonds or are they commodities like gold and oil? Should they continue trading on unregulated non-bank exchanges (famous for their Super Bowl ads featuring stars—like comedian Larry David—who say you don’t really need to understand crypto in order to invest in it) or should crypto-trading happen on highly regulated bank platforms that are mostly shut out of the market?
The Securities and Exchange Commission (SEC) and other government regulators are aware of the dangers the current uncertain climate can present to the millions of retail investors who still have billions of dollars tied up in the market—or who may be considering putting their money into it.
In March the Biden administration released an executive order embarking on a comprehensive approach to the regulation of cryptocurrency and other digital assets. Then in April, SEC chairman Gary Gensler said his agency and the Commodity Futures Trading Commission (CFTC) are examining crypto regulatory issues. (The SEC regulates securities like stocks and bonds, and the CFTC regulates commodities like oil and gold.)
“I’ve asked staff to consider how best to register and regulate platforms where the trading of securities and non-securities is intertwined. In particular, I’ve asked staff to work with the CFTC on how we jointly might address such platforms that might trade both crypto-based security tokens and some commodity tokens, using our respective authorities,” he said.
Banks also would like more clarity from regulators and say they wish the authorities would hurry up in making rules to govern how they might be able to participate in the market. In August, the American Banking Association sent a letter to the Biden administration requesting that it step up efforts to clarify regulations. It says banks are a safer alternative for investors looking to invest in crypto because they’re highly regulated, but without clearer rules on how to join in, the bank group says its members can’t offer their services effectively.
“The combination of these two approaches—inaction on the one hand to bring into the regulatory perimeter non-bank crypto companies, and limitation on the other of banks’ ability to engage responsibly in the digital asset market—creates an environment that makes it nearly impossible for responsible financial innovation to occur in this space, causing it to remain in the Wild West,” wrote Brooke Ybarra, head of the American Bankers Association’s office of innovation.
However, as banks seek ways to enter the crypto investing market more robustly, senators including Elizabeth Warren and Bernie Sanders have called on the Office of The Comptroller of the Currency to walk back rules issued during the Trump administration that had given them some ability to participate. The senators say they’re concerned that the rules “may have exposed the banking system to unnecessary risk,” citing the recent meltdown.
Acting Comptroller of the Currency Michael Hsu defended the regulator’s moves. “I think we’re doing a pretty good job,” he said on Bloomberg. “See Exhibit A: A whole bunch of stuff just happened, and the banking system is in pretty good shape, knock on wood. I think part of that is the actions we’ve taken.”
However, until regulators issue clearer rule making, crypto is likely to continue to be extremely volatile and risky. And even when regulators do issue their new rules, they’ll undoubtedly have a big impact on the price of digital currencies.
Here are four more reasons to be cautious about investing in cryptocurrency.
Vice Chair of the US Federal Reserve, Lael Brainard, called for urgent regulation Friday in the cryptocurrency market.
“The recent turbulence and losses among retail investors in crypto highlight the urgent need to ensure compliance with existing regulations and to fill any gaps where regulations or enforcement may need to be tailored—for instance, for decentralized protocols and platforms,” she said at the Bank of England Conference in London.
“As we consider how to address the potential future financial stability risks of the evolving crypto financial system, it is important to start with strong basic regulatory foundations,” she said.
Brainard stressed that innovation has made financial services faster, cheaper and reduced costs in finance but added that some costs are also necessary to keep the system safe.
She cited the price collapse of the controversial stablecoin TerraUSD, also known as UST, in June, which led to turmoil in the crypto market.
“The Terra crash reminds us how quickly an asset that purports to maintain a stable value relative to fiat currency can become subject to a run,” she said. “The collapse of Terra and the previous failures of several other unbacked algorithmic stablecoins are reminiscent of classic runs throughout history. New technology and financial engineering cannot by themselves convert risky assets into safe ones.”
Brainard emphasized that regulatory foundations for the crypto financial system should be established before the crypto ecosystem becomes large and poses risks to the stability of the broader financial system.
Max Moulder is doing whatever he can to make ends meet.
He’s taken a shot at being an Uber driver.
He’s drawing on his life-long trade of cutting and selling gemstones.
But odd jobs are not earning him enough to keep up with the growing cost of living.
“I’ve done gemstone cutting and trading for a long, long time — since I was 10 years old — that’s not paid off for me,” he said.
“It’s very difficult doing Uber driving with the cost of petrol. That’s not working. And I can’t do cabinet making anymore. So I’m running out of options really.”
In his mind, there’s just one option left: to invest in crypto.
“I feel like I’ve been forced into this,” he told ABC News.
Mr Moulder only started investing three weeks ago when the market tanked. He’s put in $1,000 so far and is willing to invest a lot more.
His view is that he’s buying cheap and so “it can only go upwards from here”.
It is faith, rather than investment fundamentals, that has left Mr Moulder, and millions of other investors around the world, either already suffering or being vulnerable to massive losses.
One in nine Australians bought crypto in the past year
Consumer advocacy group Choice has found that one in nine Australians have bought cryptocurrencies in the past year and that number is expected to keep rising.
Half of them see crypto as a long-term investment, rather than short term speculation and two in five see it as a diversification of their portfolio.
“People have really been harmed, and the system is really rigged against consumers,” said Patrick Veyret, senior policy adviser for consumer group CHOICE.
“And that’s why we’re calling for stronger consumer protections and strong obligations on cryptocurrency exchanges.”
Since November (when Bitcoin hit a record high of $US69,000), about $US1.5 trillion has been wiped off the value of the entire cryptocurrency market. That’s more than half its value erased in just six months.
Much like housing, cryptocurrencies were boosted by record low interest rates and by governments globally pumping trillions of dollars’ worth of stimulus to fight off COVID.
But unlike the housing market, which is largely regulated and incentivised through tax perks and government grants, crypto operates without regulation and, some argue, little accountability.
It’s a reality that’s not lost on global policymakers, who have signalled new regulations are imminent.
Bitcoin, which came to life in 2008 as the financial system was imploding, was started by a growing class of tech-savvy dissatisfied citizens seeking an alternative to the mainstream financial system.
Now that utopian vision is under fire, and the question everyone is asking is, will a new era of regulation kill or strengthen cryptocurrencies?
Are stablecoins actually stable?
In May, the collapse of popular cryptocurrency Luna and the so-called “stablecoin” TerraUSD showed such investments can wreak havoc on the lives of many.
Together, they were valued at about $60 billion just weeks ago. But now they are almost worthless.
Investors losing their life savings, people at risk of homelessness, and even stories of suicide surfaced on social media, causing people worldwide to question its legitimacy.
Stablecoins are cryptocurrencies that are usually pegged to a fiat currency, such as the dollar.
Most issuers claim by backing the coins with traditional assets that are safe and liquid, it protects against risk.
There are three main ways stablecoins remain pegged to a fiat currency.
First, it can be pegged to the dollar.
Second, it can be backed by reserves of cryptocurrencies.
Finally, as in the case of Terra, it can be backed by an algorithm.
This algorithm adds tokens to the supply if the price is getting too high, to bring the price back down, or removes tokens from supply if the price falls below the peg.
But on May 9, Terra crashed. It is now worth just 3 US cents.
Its sister coin Luna, which was worth $US119 at its peak, is now worth nil.
Terra was being deposited by many investors via a platform called Anchor, which worked like a bank savings account. It allowed users to earn yields on Terra deposits and take out loans against holdings.
The team behind Terra were telling investors if they deposited Terra via Anchor they could get returns of around 20 per cent.
Sound too good to be true? That’s because it was, said Henri Arslanian, a former PwC crypto leader and partner who is now an author and Adjunct Professor at the University of Hong Kong.
“What’s important to understand is that there are different kinds of stablecoins,” he said.
“Nothing malfunctioned with Luna or Terra. But the design didn’t provide a solution in this black swan scenario that eventuated.
“It’s like saying, you have built a building, but it’s not built to withstand an earthquake. That means, if there was an earthquake, the building would collapse.”
“This is what happened with Terra. The building (infrastructure) behind it did not have the right safeguards.”
At the time of the crash, many on social media speculated that the big US hedge funds and trading firms, BlackRock and Citadel Securities, were behind it.
The accusation was that they jointly borrowed 100,000 bitcoin from cryptocurrency exchange Gemini to purchase Terra, only to dump the assets, causing the market to collapse and wiping out more than $US25 billion in the underlying LUNA market value. Both firms have rejected that, saying they don’t trade Terra.
Mr Arslanian said regulators and policy makers will now try to introduce new regulation over algorithmic stablecoins but that it will be difficult.
The investors who lost money by believing Do Kwon
Do Kwon, who founded Terra creators Terraform Labs, did not respond to ABC News’ request for comment.
He had tweeted at the time of Terra’s collapse, in early May: “I understand the last 72 hours have been extremely tough on all of you — know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this”.
But on Saturday, he attempted to resuscitate the Terra ecosystem by launching a new blockchain (Terra 2.0) and a new cryptocurrency (Luna 2.0).
The new version of Luna appears to be suffering a similar fate. Its value plunged by more than 70 per cent within hours of trading.
Mr Kwon has alsobeen caught up in other controversies, including being directed by South Korea’s National Tax Service to pay 100 billion won (roughly $US78 million) in taxes and is facing lawsuits from burnt investors.
Conor Bronsdon’s is one of those, although he is not thinking of litigation.
His $US400,000 investment was wiped out when Terra/Luna crashed.
“It was the majority of my savings,” said the 30-year-old investor, based in Seattle.
Crypto has been particularly popular with millennials across the globe — more than one quarter of Australian investors aged 18 to 34 have at least 10 per cent of their portfolios invested in cryptocurrency, according to eToro data.
Despite the personal loss, Mr Bronsdon is still an advocate of decentralised transactions.
He said, with the benefit of hindsight, he would not have put so muchmoney into Terra andLuna.
Is crypto a good investment?
Henrik Andersson is the chief investment officer and co-founder of Apollo Capital.
He said his firm did have exposure to Terra and Luna and lost out because of it but said that won’t stop them investing in crypto.
“It was not a catastrophic loss for us,” he told ABC News.
The firm has been focusing its investments solely in crypto space for past 4.5 years, and he has been personally investing for almost a decade.
“It’s hard to find another asset class that’s generated higher returns over the past few years and that’s set to continue.”
However, other big investors disagree cryptocurrencies give higher returns – relative to the risk — and are steering away from crypto.
PGIM, a global $US1.5 trillion asset manager, recently released a report calling cryptocurrency “portfolio Kryptonite”.
About 11 million superannuation members looking to build up their super retirement nest eggs have some exposure to the firm’s institutional investment.
Its chief investment officer Taimur Hyat argued that crypto is not a quite currency and that there is little evidence that cryptocurrencies deliver diversification compared with mainstream financial assets.
He noted that with cryptocurrency like bitcoin “you get the same risk-adjusted returns as other asset classes, but you have far more volatility”.
Mr Hyat said it does not act as effective hedge against fluctuation from factors like COVID.
Mr Hyat said there is now the risk that increased regulation could see peoples’ investments further tank as “there’s uncertainty about what the regulations will be”.
Australians losing out because crypto is not regulated
Aside from the investment fundamentals, there’s also questions about the lack of consumer protections when investments fail.
Mr Veyret, from Choice, wants to see the same rules that apply to stock markets, apply to digital assets.
The evidence now shows that stablecoins such as TerraUSD might not actually be that safe, he said.
“It’s really concerning that these exchanges are advertising… terms like safe and also really high yield.
“Businesses and exchanges have an obligation to ensure that they’re not engaging in misleading and deceptive conduct.”
Consumer Action Law Centre (CALC) chief executive Gerard Brody is calling for new laws to be introduced, requiring crypto platforms to be obliged to detect, prevent and reimburse people from scams.
“We regularly hear from callers to our advice lines who have lost astounding sums of money — often their entire life savings — to scams occurring on crypto platforms,” he said.
“The reality is that these platforms are a conduit for organised criminals and money launderers.”
CALC is also advocating for restrictions on advertising and marketing of crypto to the general public, in its submission to Treasury’s review of the sector.
Regulation is imminent but how will it look?
US Treasury Secretary Janet Yellen has stated that stablecoins are anything but stable, while flagging regulation of the wider digital assets market.
“Stablecoins raise policy concerns, including those related to illicit finance, user protection, and systemic risk,” Dr Yellen said.
“And, they are currently subject to inconsistent and fragmented oversight,” she said, adding that the broader ecosystem should governed in order to allow “responsible innovation”.
From a local perspective, Australia’s new Labor could impose tougher regulation. In the lead up to the election Labor’s Stephen Jones had said that would consider crypto regulation as part of a broader overhaul of the digital payments system.
If that happens, corporate watchdog ASIC would be responsible for overseeing changes.
A spokesman for ASIC said the regulator does not currently regulate crypto assets unless they are legally considered as financial products, “and it is not always clear whether a particular crypto-asset product is within our jurisdiction”.
He said in the meantime, ASIC supervises products traded on the stock exchange,such as the recent ETFs with crypto as an underlying asset.
ASIC also investigates conduct breaches such as misleading or deceptive behaviour, where they involve crypto-assets that are financial products.
Joni Pirovich, a lawyer specialising in blockchain and digital assets, said crypto tokens are being used to experiment how to do financial transactions better, cheaper and faster.
“There are more than 10,000 of these tokens that people can purchase and trade, which is far beyond the current resources of any regulator to supervise meaningfully,” she said.
“But there’s a desire from policymakers around the world to make sure crypto tokens are brought into a supervised net.”
That policy conversation has been happening for the past six years, but the collapse of Terra (which trades under the code “UST”) and Luna has people refocused on it.
“The average person had invested about $50,000 in UST and that investment has shrunk to nil,” she said.
“There’s new calls for consumer protections, but uncertainty about the best approach: whether mums and dads should maintain choice to access these risky tokens or whether to make the issuers responsible for preventing investment from mums and dads.”
But the issuer is often not linked to one country. There is often a global team of people involved in coming up with the token, its features and what it can do.
She said the other option is to have new law, enforced by a regulator like ASIC, that requires an issuer to have controls that cap mum and dad investor crypto deposits to no more than, say, $5,000.
And a final option, which she does not recommend, is to ban these products for retail investors.
Meanwhile, US lawyer Moe Vela believes crypto needs to be regulated but urged the current US administration to not fall into the trap of a regulatory environment that will stifle growth under the guise of protecting consumers.
Mr Vela was director of administration for US President Barack Obama, where he worked closely with Joe Biden.
He also worked with formerVice-President Al Gore in the Clinton White House, and is a director at Unicorn Hunters, the company building a cryptocurrency called Unicoin.
“Regulation can be healthy if written in the spirit of fostering innovation and creating an inviting environment to new and existing investors,” he said.
Can crypto pose a wider risk to financial system stability?
Tony Richards was head of payments at the Reserve Bank for 10 years.
He said too many people are speculating on digital currencies, unaware of the risk that its value “can fall sharply or even to zero”.
He warned that anyone buying cryptocurrency should be mindful that even bellwether cryptocurrencies like bitcoin are not yet considered by corporate watchdog ASIC to be a financial product, meaning it’s not regulated under the Corporations Act.
“Bitcoin only gets its value from the hope that someone else tomorrow will give you value for it,” Dr Richards said.
“It’s a thing that people can trade they can buy and sell between each other, but it’s, it’s not a financial product.”
But he also noted that cryptocurrencies, like any other goods or services in the economy, could be subject to Australian Consumer Law protections.
He said the consensus from central banks and others in the international organisations like the International Monetary Fund (IMF) or the Bank of International Settlements (BIS) are that the links between the cryptocurrency universe and the traditional financial sector are weak.
He said there may be a world where digital currencies, distributed ledger technology and smart contracts are a major part of financial system, but that “cryptocurrencies might be very much a sideshow”.
Should marketers be able to advertise investments as ‘safe’
In early April, several weeks before Terra (UST) collapsed, the cryptocurrency exchange Binance released an online advertisement claiming that stablecoin was a “safe” investment.
Binance also promoted it as a “safe and happy” opportunity to earn a very high return — up to 19.63 per cent.
When asked about the ad, Binance Australia’s CEO, Leigh Travers, said: “It’s not the language that I think would use again if that advertisement were to be considered by the marketing team”.
Like many others in the industry, Mr Travers welcomes increased scrutiny in the crypto industry.
By improving the standards and better protecting consumers, crypto exchanges can get access to things like banking and financial services, including insurance, he said.
He explained that Binance currently has a pool of more than $1 billion in capital to protect users in the event of exchange malfunction. However, it is made up of bitcoin and other cryptocurrencies, as opposed to actual cash.
While he noted the industry may have got a bad reputation following last month’s crash, he did not believe there was widespread market manipulation.
But he said the sector also had the potential to drive growth.
“There is true value here. There could be a major industry with… tens of thousands or potentially hundreds of thousands of jobs — high paying jobs in an exciting industry.
“So let’s work together and make sure that Australia has an opportunity to compete on a global scale here.”
Mr Bronsdon said there is a need to protect individuals who invest in crypto, but that “we want to be careful about how those regulations are put into place”.
“We don’t want to stifle the innovation that’s happening, the space and some of the incredible things that are being built, but at the same time normal people need to be protected,” he said.
“It has affected hundreds of thousands, if not millions, of people worldwide. There are opportunities for protections.”
The cryptocurrency industry is ramping up efforts to recruit more legal talent as it faces increased regulatory pressure while looking to be accepted by and become part of mainstream finance.
Crypto exchanges and companies are poaching attorneys left and right, from both law firms and other crypto companies, bringing them in-house to help navigate an evolving regulatory landscape while helping to curb outside legal expenses, industry participants said. Law firms, which are sometimes losing their partners to in-house positions, are also building up their crypto practices to maintain that valuable expertise.
The increased demand for lawyers also marks a turning point for crypto, whose early supporters often expressed scepticism of regulation. The industry has been expanding rapidly with hopes of attracting more mainstream investment opportunities and many are embracing the stance that they want regulatory clarity.
“In [the crypto] space, the consensus is you need to have someone in-house early,” said John Wolf Konstant, a senior consultant at technology-focused legal recruiting firm Whistler Partners. “Especially since investors are going to require that, you need to have someone there to help chaperone the process and to make sure everything is buttoned up from the start.”
Competition is also driving up salaries in the crypto space at a faster rate than in the larger in-house legal market, particularly for senior-level positions, Konstant said. Total annual packages, including tokens and equity, can run into seven figures at the very top of the market, he added.
Marco Santori, chief legal officer of Kraken, tweeted in February that the San Francisco-based crypto exchange was looking to hire 30 lawyers in the next three months. He added that he would like to hire 60, “but honestly I don’t know how to get it done”.
“Kraken legal is fully on track with its hiring goals since my comments in February,” Santori said last week in an email. “We are attracting the best lawyers from both traditional finance and white-shoe firms. The brain drain is real and we couldn’t be happier with it.”
Lawyer Jorge Pesok recently joined crypto-based nonprofit HBAR Foundation, which gives out grants to projects, as its chief legal officer after about 10 months as general counsel and chief compliance officer at crypto exchange Tacen. Before Tacen, he was at law firm Crowell & Moring.
“The market is hot,” Pesok said, adding that he received four job offers before he chose HBAR, primarily because of its commitment to sustainability, and he wasn’t even looking for a new position. “Everybody is looking for talent,” he said, adding that for HBAR, even the simple grants it makes require help, given the nuances of cryptocurrency and the regulatory scrutiny around the industry.
Recruiter Whistler Partners said about 10% to 15% of all recent placements have been in the crypto or financial technology sectors, with firms hiring for both in-house counsel and law firm positions, according to Konstant, who himself was a lawyer before moving to the recruiting field. He said the firm was working on six to 10 in-house legal jobs in the blockchain or fintech space over the past year at any given time.
Konstant said there is a great deal of competition for all legal talent across sectors, where candidates for in-house roles may receive multiple offers. But “for the crypto space, it’s more pronounced,” he said, adding that there is a huge demand for those with specialised knowledge in crypto and previous experience working at law firms that specialised in crypto or having built in-house crypto-focused teams.
As with most other jobs, firms operating in the crypto sector would prefer to hire someone with some relevant direct experience, but most expect to train new legal staff on the job as they learn about the specific projects each firm does.
Gregory Lisa, who most recently was a partner at law firm Hogan Lovells in Washington DC, joined decentralised financed-focused company Element Finance as its first chief legal officer in December. Lisa, who previously worked as a regulator at the Financial Crimes Enforcement Network, said his new position at the 25-person startup, which builds open-source protocol for fixed- and variable-yield tokens, offers him the chance to focus on the growth of one company, versus a portfolio of clients as an external counsel. His responsibilities now include engaging with regulators and law enforcement and managing internal legal issues.
“You really get a chance to write the script and to engage with companies at an early stage,” Lisa said, adding that he has also stayed on as a special adviser for Hogan Lovells to help with the transition.
Cathy Yoon joined crypto technology company MPCH at the end of March as its chief legal officer after less than a year as general counsel of crypto exchange INX. She said she had no intention of moving jobs, but was interested in helping build blockchain infrastructure that could more easily support and onboard additional blockchain assets, which isn’t possible currently. So far, her day-to-day work includes managing internal corporate matters, such as the structuring of legal entities and intellectual property issues, and facilitating meetings with potential investors and customers.
The increasingly competitive job market also demands more lawyers who are “very commercial,” Yoon said, since crypto companies want to bring in attorneys early on to brainstorm with tech teams on what problems their products are meant to solve. “There has been a shift from lawyers being seen as ‘keeping us out of trouble,’ to becoming important members of the management team,” she said.
Law firms, some already struggling with a shortage of talent, are beefing up their crypto services as well, sometimes looking to acquire a whole team from other firms.
Orrick Herrington & Sutcliffe is looking to build “a complete offering” of services for blockchain firms, from helping with entity formation to advising on regulatory issues, according to Daniel Forester, a partner at the firm and leader of its fintech practice. The law firm, with roots in the traditional technology sector, currently has about 20 partners leading its crypto-related work and is looking to lure current regulators and candidates or teams from other law firms or in-house positions, he said.
Facing increasing competition for legal talent, Forester said Orrick continues to focus on retaining employees, including those at the associate level. “There are more positions than people,” he said of the legal industry as a whole. “The key to long-term success is retention.
Four years ago, Pamela Draper said her colleagues were astonished that she was leaving investment banking for crypto. Today, many of them are following in her footsteps.
Ms. Draper was working in investment banking at Bank of Montreal when a client approached her with a proposal: move from Toronto to Calgary and help him start a cryptocurrency exchange company.
“My first response, was ‘absolutely not,’ ” she said.
But over the 2017 Christmas holidays, her feelings changed: This was not just a new job, she realized. After 14 years in banking, it was a rare chance to join a new industry on the “ground floor” and build a business from scratch, alongside experienced shareholders.
By the time those holidays were over, she said, her feelings had turned. “I went from ‘how could I do this’ to ‘how could I pass up this opportunity?‘ ”
When Ms. Draper became chief executive at Bitvo Inc., a cryptocurrency exchange now with more than 14,000 users across the country, she was one of the first bankers to enter the then-nascent sector in Canada.
“Four years later, a lot of my ex-colleagues at the Bank of Montreal have come into this world,” she said. “It’s great to work with them again on this side of the fence.”
Today, the cryptocurrency landscape has grown legs: It has expanded in value, in public engagement, and in regulation. An influx of capital into the space in recent years has meant that many crypto companies are on the hunt for talent, especially for people with experience in regulation, investment and payment systems. These abilities are often held by employees working in TradFi – traditional finance.
The demand means a growing flow of professionals are leaving traditional banking jobs and embracing a sector once considered too risky.
While the crypto world is not yet large enough to make a significant dent in the hiring ability of big banks – which together employ hundreds of thousands – it is adding some pressure to an already tight market. The past two years have brought bounty to the banks through a record number of mergers and acquisitions, and this demand for bank employees has created a shortage of talent.
Guy Shaul, recruiter for executive search company Heidrick & Struggles International Inc., said his company’s crypto department has grown steadily larger over the past year as financial professionals shift their thinking about roles in the growing field.
“When we first started working in this space, we would call people and would have to try to convince them that our clients weren’t laundering money,” said Mr. Shaul, who is based in London, England. “Now, we actually have to try and work out who’s genuinely interested, because most people are open to hearing about it because there’s a lot of money being made.”
One point of attraction is the opportunity for wealth creation.
“Crypto salaries are finally starting to become competitive with TradFi,” said Tanim Rasul, chief operating officer at National Digital Asset Exchange, a Calgary-based crypto trading platform. “I think that’s a huge part of why people are starting to, not just move over, but come out of retirement to get involved.”
Mr. Rasul said his company has received thousands of applications from employees working in traditional finance. Many of the skills needed to work in a bank – such as handling mergers, investing and regulation – are transferrable to crypto companies and highly in demand, he said.
Ms. Draper said she has indeed worked directly with securities commissions to influence the shape of the regulatory landscape.
It’s an interesting paradox: While the industry itself is aiming to disrupt the existing financial ecosystem, many are turning to executives with decades of traditional experience.
Sebastien Davies is among those with a TradFi background who made the switch. After years of work at financial institutions including CIBC, Royal Bank of Canada and Rayne Capital Management Inc., he decided to leave traditional finance for a job at Aquanow, a Vancouver-based infrastructure and liquidity provider for digital assets.
“I was motivated by a real sense of curiosity. I wanted to jump into something new and innovative, and work at something totally different,” Mr. Davies said. “It’s not to say you can’t innovate when you’re working at a bank, but it’s a lot faster if you move to a startup.”
Overall, he said he has seen employees leaving the industry “at an increasing rate,” part of a wider trend of young people wanting to switch jobs more frequently.
He said he was also attracted by the “unquestionably” different culture, which prioritizes collaboration over moving up ladders. Meanwhile, the urgency of the work has made his days more unpredictable.
“At the bank, the market would open at 9:30, we’re closed at four, and I have a list of things to do on a regular basis in between. But now, I just try to jump in and figure out how I can help,” Mr. Davies said.
This, for many, is the draw: the ability to build something from scratch, from idea to “fully functioning business model available to the public,” said Bitvo’s Ms. Draper. It’s what has made her “leap of faith” worth it.
“There are very few things more rewarding than watching your company grow over the years,” she said. “And being part of growing the industry – being part of regulatory decisions and helping to shape that regulatory landscape – that’s a legacy that will stay in place for decades.”
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
WASHINGTON—As Washington attempts to get its arms around the rapidly growing cryptocurrency industry, policy makers in the Biden administration and on Capitol Hill have identified stablecoins as an initial target for tighter regulation.
Often billed as one-to-one representations of a currency like the dollar, stablecoins have recently exploded in popularity as investors use them for trading other cryptocurrencies. There are dozens of stablecoins, though a handful pegged to the dollar account for most of the market value, which grew roughly 500% in the 12 months ending in October, according to a report from the Biden administration.
UK Government Unveils Plan To Exploit Potential Of Cryptocurrency
On April 4, the United Kingdom unveiled a detailed strategy to harness the power of cryptocurrency assets and blockchain technology to ease the process of making payments for customers.
Financial services minister John Glen said Britain will pass legislation to bring some stablecoins under the regulatory framework, such as complying with existing payment rules.
Stablecoins are cryptocurrencies that are designed to have a stable value in comparison to traditional currencies or a commodity like gold, avoiding the volatility that makes Bitcoin and other digital tokens unsuitable for most transactions.
The government believes that all stablecoins that reference a fiat currency should be regulated.
Here are 10 points to know about Britain’s cryptocurrency hub push:
1) The decision to regulate stablecoins to make way for their usage as a recognised form of payment is part of a larger plan to make the UK a global hub for cryptoasset technology and investment.
2) According to the Government of the United Kingdom, legislation for a financial market infrastructure sandbox to assist firms in innovating, an FCA-led CryptoSprint, collaboration with the Royal Mint on a non-fungible token (NFT), and the formation of an engagement group to work more closely with industry are among the measures.
3) Chancellor of the Exchequer, Rishi Sunak instructed the Royal Mint to design an NFT to be released by the summer.
4) Sunak said that he wanted to make the UK a global powerhouse for cryptoasset technology.
5) Stablecoin issuers and service providers will be able to operate and invest in the UK if the government passes the legislation to bring them into the payments regulatory framework.
6) The government can assure financial stability and good regulatory standards by recognising the promise of this technology and regulating it. This will allow these new technologies to be utilised reliably and safely in the future.
7) John Glen also stated that the UK will explore the transformative benefits of Distributed Ledger Technology in its financial markets. The technology allows data to be synchronised and shared in a decentralised manner, potentially resulting in increased efficiency, transparency, and resilience.
8) Later this year, Britain will hold a consultation on developing legislation for a broader set of cryptoassets, such as Bitcoin, taking into account the sector’s energy use.
9) The UK’s plan also includes exploring blockchain’s potential, including if it can be used to issue British government bonds or gilts.
10) The UK will also look into lowering disincentives for fund managers while including cryptoassets in their portfolios.
WASHINGTON—Bitcoin’s price rose after President Biden announced an executive order to study digital currencies, a move the industry welcomed and skeptics decried as delaying needed regulation.
The order, titled “Ensuring Responsible Development of Digital Assets,” directed agencies across the federal government to produce reports on digital currencies and consider new regulations. It outlined the risks cryptocurrencies pose to the economy, national security and climate, while also noting their possible benefits.
It also asked agencies to review the possibility of issuing a digital version of the dollar, tasking the Justice Department with assessing whether it would require new legislation and possibly preparing such legislation. Some central banks around the world have experimented with the concept to keep pace with private-sector payments innovations, and the Federal Reserve has already started to evaluate the possibility.
As details from the executive order leaked overnight, the price of
“We look forward to continuing our work with regulators and lawmakers,” he said.
The chief executive of Valkyrie Funds,
said she expects the order will lead to regulations that will further help the industry grow. “Clarity spurs adoption, and adoption leads to growth,” she said. Her firm sells crypto-focused exchange-traded funds.
The crypto industry has waged an intense lobbying campaign over the past year to stave off more-aggressive regulation of digital assets. A report this week by Public Citizen, a progressive advocacy group, said the number of cryptocurrency lobbyists nearly tripled in recent years, from 115 in 2018 to 320 in 2021. The sector’s lobbying expenditures rose to $9 million from $2.2 million.
Crypto skeptics see the executive order as a step back.
executive director of Duke University School of Law’s Global Financial Markets Center, said it appears likely to delay any consequential policy decisions until after the midterm elections in November. In most cases, the White House is giving agencies at least 180 days to produce their reports.
“Leading up to this executive order, the narrative that had been circulating was that the administration was set to crack down on crypto,” Mr. Reiners said.
“This executive order is a complete 180 from that,” he said. “This is as close to an embrace of crypto as you could have hoped for from this Biden administration, if you’re pro-crypto.”
Financial regulators have already been studying cryptocurrencies for years. The Treasury Department’s Financial Crimes Enforcement Network issued guidance in 2014 around cryptocurrency-payment systems. The Securities and Exchange Commission has taken scores of enforcement actions against individuals and entities in the sector, while the Commodity Futures Trading Commission set up an initiative to study cryptocurrency and other technological innovations in 2017.
A senior administration official noted that the White House held a number of “Crypto Sunday” events to gather feedback from stakeholders as it prepared the executive order. A White House spokeswoman didn’t immediately respond to questions about the events, such as how many were held or who participated.
has said that many cryptocurrencies should be regulated as securities such as stocks and bonds, something that would involve strict disclosure requirements from issuers. Crypto firms have pushed for CFTC oversight, believing it would be easier to comply with.
a partner at law firm Mayer Brown LLP, said Mr. Biden’s executive order appears unlikely to resolve such questions.
“Rather than provide direction with respect to who regulates what, the order calls for research, assessment and coordination within specified deadlines,” Mr. Kluchenek said. “Many market participants were hoping for more concrete direction.”
Industry lobbyists say that heavy-handed regulation would risk pushing more of the cryptocurrency market overseas. Some law-enforcement and national-security officials are reluctant to discourage use of cryptocurrencies such as bitcoin, saying they allow transactions to be traced more easily than cash.
“Ensuring that the U.S. remains the leader in global financial infrastructure for generations to come has never been more paramount for economic and national security interests,” said
a former Treasury official in the Trump administration who is now a general partner at
a venture-capital firm invested in crypto. “The president’s recognition of that is an essential step in that direction.”
But investor advocates worry that the executive order will give an opportunity to dilute existing regulations.
“Silicon Valley and their army of new lobbyists may have feared the worst, and instead the White House is rolling out the welcome mat,” said
executive director of the Healthy Markets Association, an investor trade group. “Politicians and lobbyists are likely to use this as an opening line to try to rewrite the securities, commodities and banking laws under the guise of better regulating crypto.”
—Ian Talley and Paul Vigna contributed to this article.